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Basic Question 5 of 9
Aligning the preferences of principals and agents can reduce agency costs. An example is ______.
B. financial audits and financial reporting
C. issuing stock options to managers and employees
A. lobbying/political costs
B. financial audits and financial reporting
C. issuing stock options to managers and employees
User Contributed Comments 3
| User | Comment |
|---|---|
| forry9er | because the agency costs are reduced when interests are more closely aligned? |
| merc5559 | yes |
| Rasikh | Agency costs are the costs incurred by the principle due to agent making a sub-optimal decision, defined as a decision in which the agent prefers his own interest over the principal's. |
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Learning Outcome Statements
describe the principal-agent relationship and conflicts that may arise between stakeholder groups
CFA® 2025 Level I Curriculum, Volume 2, Module 3.